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The Lucent Investment Partnership
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The pressing need for housing has only increased since the 2008 financial crisis. People are working and need homes, and private investors can build them.
Local Authorities in the UK are currently facing huge challenges. The global economic downturn has reduced central funding whilst the country’s population increased by 7% in the decade to 2011. Government figures suggest that 232,000 new homes will need to be built every year to meet projected household growth in England alone over the 25-year period from 2008 to 2033. So how do local authorities build more homes with less money whilst central government is putting them under increasing pressure to do so?
Traditionally the answer would be found in selling off land to a developer and hoping that the developer would build what was needed, where it was needed, when it was needed. In today’s environment, that is not much of an answer!
The Lucent Local Investment Partnership (LIP) is a sophisticated solution to this problem. Lucent provides the commercial know how, market relationships and investment funding (via strategic land partnerships) required to give local authorities a holistic plan across their development portfolio, to assist them in gaining the best returns for their land assets and to ensure that the developments are entirely appropriate and in keeping with the local community.
The key partners in this arrangement are the Local Authority and the Lucent Strategic Land Fund (LSLF). Other private or public sector partners in the land investment opportunity can be included from the outset or later on. Adding them into the partnership is both simple and cheap to do.
The partnership is structured as a 50:50 Limited Liability Partnership. Both partners share the enhanced value on an equal footing, (a “paripassu relationship” with each partner receiving the same rate of return per pound of investment). The Council provides land and strong strategic and political links throughout its region. It can also provide or source grant funding to assist with land infrastructure requirements which, in turn, will support/maintain the IRR and also support project viability. Lucent Advisors, on behalf of the LSLF, provides requisite investment and resources to secure planning consent on each site, in accordance with the use set out in each Project Plan and agreed to by the Partnership.
So what will the Partnership do? Lucent Advisors will arrange and manage appropriate exits to operators to deliver housing, food or other retail, commercial or employment opportunities. The partnership will have the capability to acquire identified sites within towns (or even across a wider region), enhance sites and meet specific strategic community objectives. It will also support the Council Plan delivery (and other Council priorities) through the delivery of land investment plans. In addition, over the life of the Partnership, further sites and opportunities will be identified and benefits realised.
• The LIP model addresses many of the shortcomings of the Local Asset Backed model (LABV), currently popular with some local authorities and which has several disadvantages including that of the “asymmetric partnership” in which each partner is focused on different commercial and delivery objectives. This can lead to a lower or nil cash return to the authority partner.
• The LIP model provides the Council with a cash return, capital or revenue plus the economic, employment and regeneration benefits.
• It also has the ability to acquire sites anywhere. As a private entity, the LIP does not have geographical boundaries.
• LSLF is a capital growth fund. Its model is predicated on investing and growing capital investment. It is not interested in delivering construction/developer returns, ensuring both Partners have the same lined-up and equal interest in outcomes – a true joint (and equal) venture partnership.
• Moreover LSLF’s return can be invested back into other projects as determined by the Council and Partnership.
• Additional land, for example HCA land, can be “directly injected” into the LIP.
• Lastly, the model allows the LIP to work with other local authorities to meet the needs of the wider region.
Following the success of both the Allerdale Investment Partnership, formed in Spring 2014, and the Peterborough Investment Partnership, formed in December 2014, several other councils have approached Lucent to discuss the possibility of entering similar arrangements.
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